IMF Completes Review and Approves US$957 Million CreditTranche for Indonesia

Alassane D. Ouattara, Deputy Managing Director of the International Monetary Fund (IMF), said: "I am pleased to announce that, in support of the Indonesian government’s economic program, the IMF’s Executive Board today approved the completion of the third review under the Extended Fund Facility (EFF) 1 and the release of the next SDR 684.3 million (about US$957 million) credit tranche for Indonesia. The Indonesian economy has remained on the stabilization path under the most difficult circumstances. Continued policy implementation, despite an environment of political uncertainty, has helped improve market sentiment, and the rupiah has strengthened considerably. Inflationary pressures have eased and marked progress has been made in stabilizing the food situation. There are also encouraging signs that business confidence and the outlook for the real economy has begun to improve. While there is scope for progressively lowering interest rates further, the authorities need to remain vigilant and proceed cautiously."

Ouattara said that Indonesia still faced many challenges, notably in restructuring the banking system and the corporate sector. He emphasized that the Indonesian Bank Restructuring Agency (IBRA) needs to operate independently and authorities should accelerate efforts to recapitalize viable banks using objective and transparent criteria. "Important progress also has to be made in corporate restructuring. The government must expedite regulatory approvals for restructuring, and take further steps to strengthen the capacity of the judiciary to implement the bankruptcy law." Ouattara noted that the Indonesian economic program continues to be implemented with the active support of the World Bank and the Asian Development Bank.

1 See News Brief No 98/31 of August 25,1998. The EFF, for SDR 4.67 billion (311.8 percent of quota), replaced the three-year stand-by credit approved by the IMF on November 5, 1997 and covers its remaining 24 month period through November 5, 2000.